Unlocking Hidden Value in Riot Platforms
Riot Platforms, a bitcoin mining and digital infrastructure company, has been underperforming despite favorable market conditions. With a market value of $3.97 billion and a stock price decline of 24% this year, the company’s lack of confidence in management is evident. Starboard, a successful activist investor, has taken notice and sees opportunities for operational and strategic value creation.
A Company in Need of Change
Riot Platforms operates in both bitcoin mining and engineering, with two business segments: Bitcoin Mining and Engineering. Despite being one of the largest publicly traded bitcoin miners, the company’s stock price has underperformed its peers. The main reasons for this include excessive spending on selling, general, and administrative expenses, high stock-based compensation for executives, and poor corporate governance.
A Path to Value Creation
Starboard’s expertise in corporate governance and operational efficiency can help Riot Platforms optimize its operations and reduce unnecessary expenses. By right-sizing executive compensation and improving corporate governance, the company can create value for its shareholders. Additionally, Starboard’s plan to pursue the massive demand opportunity from hyperscalers or large-scale cloud computing companies can generate significant revenue for Riot Platforms.
The Hyperscaler Opportunity
Riot Platforms’ bitcoin mining facilities share key inputs with hyperscalers, making them ideal candidates for contracting out capacity or converting their crypto operations. This strategy has been successfully pursued by several of Riot’s competitors, resulting in significant revenue growth. By converting its unused capacity to hyperscaling, Riot Platforms can generate an incremental $600 million in cash flow annually.
A Call to Action
Riot Platforms’ management must decide whether to optimize value for all involved or continue as a bitcoin miner. By choosing the former, the company can create billions of dollars in value and avoid a potential proxy fight with Starboard. With Starboard’s expertise and guidance, Riot Platforms can unlock its hidden value and create a brighter future for its shareholders.
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